Ciena Corporation Summer 2021
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Ciena Corporation Summer 2021 Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information.
Forward-looking statements and non-GAAP measures Information in this presentation and related comments of presenters contain a number of forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts, assumptions and other information available to the Company as of the date hereof. Forward-looking statements include Ciena’s prospective financial results, return of capital plans, business strategies, expectations about its addressable markets and market share, and business outlook for future periods, as well as statements regarding Ciena’s expectations, beliefs, intentions or strategies regarding the future. Often, these can be identified by forward-looking words such as “target” “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “plan,” “predict,” “potential,” “project, “continue,” and “would” or similar words. Ciena's actual results, performance or events may differ materially from these forward-looking statements made or implied due to a number of risks and uncertainties relating to Ciena's business, including: the effect of broader economic and market conditions on our customers and their business; our ability to execute successfully our business and growth strategies; the duration and severity of the COVID-19 pandemic and its impact on macroeconomic conditions, economic activity, demand for our technology solutions, short- and long-term changes in customer or end user needs, continuity of supply chain, our business operations, liquidity and financial results; changes in network spending or network strategy by our customers; seasonality and the timing and size of customer orders, including our ability to recognize revenue relating to such sales; the level of competitive pressure we encounter; the product, customer and geographic mix of sales within the period; supply chain disruptions and the level of success relating to efforts to optimize Ciena's operations; changes in foreign currency exchange rates affecting revenue and operating expense; factors beyond our control such as natural disasters, acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic; the impact of the Tax Cuts and Jobs Act; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; changes in estimates of prospective income tax rates and any adjustments to Ciena's provisional estimates whether related to further guidance, analysis or otherwise; and the other risk factors disclosed in Ciena’s periodic reports filed with the Securities and Exchange Commission (SEC) including Ciena’s Annual Report on Form 10-K filed with the SEC on December 18, 2020 and Ciena’s Quarterly Report on Form 10-Q for the second quarter of fiscal 2021 to be filed with the SEC. All information, statements, and projections in this presentation and the related earnings call speak only as of the date of this presentation and related earnings call. Ciena assumes no obligation to update any forward-looking or other information included in this presentation or related earnings calls, whether as a result of new information, future events or otherwise. In addition, this presentation includes historical, and may include prospective, non-GAAP measures of Ciena’s gross margin, operating expense, operating profit, EBITDA, net income, and net income per share. These measures are not intended to be a substitute for financial information presented in accordance with GAAP. A reconciliation of non- GAAP measures used in this presentation to Ciena’s GAAP results for the relevant period can be found in the Appendix to this presentation. Additional information can also be found in our press release filed this morning and in our reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission. With respect to Ciena’s expectations under “Business Outlook", Ciena is not able to provide a quantitative reconciliation of the adjusted (non-GAAP) gross margin, operating expense, operating margin and earnings per share guidance measures to the corresponding gross profit and gross profit percentage, and operating expense GAAP measures without unreasonable efforts. Ciena cannot provide meaningful estimates of the non-recurring charges and credits excluded from these non-GAAP measures due to the forward-looking nature of these estimates and their inherent variability and uncertainty. For the same reasons, Ciena is unable to address the probable significance of the unavailable information. Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 2
COVID-19 response
Safety and community Business continuity Financial strength
• Prioritizing health of employees and • Supply chain design and business • We have a strong balance sheet and
following CDC guidance for employers continuity planning has enabled us to have demonstrated solid cash flow
continue to support customers and generation over time
• The vast majority of our employees are mitigate disruption
working remotely • In light of our confidence around cash
• Significant IT investment in digital generation, we reinstated our share
• Instituted pandemic employee benefits platforms and virtual collaboration repurchase plan starting in the first
tools has enabled a seamless quarter of 2021
• Enhanced our corporate charitable transition to remote working
matching program for employee
donations and volunteering Result: We are well positioned to Result: Our financial strength provides
manage through the current set of long-term resiliency and differentiated
Result: Our employees have excelled challenges presented by COVID-19 flexibility to support our business
through their continued focus, strength
and kindness
As COVID-19 challenges vary around the world, we remain vigilant and committed to our
customers and employees
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 3
Our Pedigree Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. 4
Our portfolio
Enabling the Adaptive Network™
SOFTWARE CONTROL AND AUTOMATION
Blue Planet® multi-domain orchestration, federated inventory, and service order management solutions
support the broadest range of closed-loop automation use cases across multi-layer, multi-vendor networks.
Ciena’s Manage, Control and Plan (MCP) domain controller provides intelligent, data-driven software-defined CIENA SERVICES
programmability to lifecycle operations of Ciena networks.
A consultative approach
to build, operate, and
ANALYTICS AND INTELLIGENCE continually improve
Ciena and Blue Planet® Unified Assurance and Analytics: Open suite of software products that unifies customers’ networks to
multi-layer, multi-domain assurance, with AI-powered analytics to provide strategic insights to transform and simplify accelerate their unique
business, IT, and network operations. journey to the Adaptive
Network.
MCP Advanced Apps: Applications designed to enhance operations and simplify user experience for optimization of
multi-layer network performance, featuring Liquid Spectrum™ for increased optical network capacity and service We bring experienced
availability, and Adaptive IP™ Apps for advanced real-time visualization and analysis of IP networks. technical personnel,
best practices, and
PROGRAMMABLE INFRASTRUCTURE processes—along with
the most effective tools
Converged Packet-Optical Networking: Software-programmable platforms, featuring Ciena’s award-winning for handling network
WaveLogic™ Photonics with optional agnostic packet/OTN switching, designed to maximize scale, flexibility, and complexities to work
open networking. Optimizes network performance across applications from metro to submarine, and is the dominant alongside customers
portfolio used globally for Data Center Interconnect. every step of the way.
Routing and Switching: Purpose-built routing, switching, and x86 VNF hosting platforms—using a common
Service-Aware Operating System (SAOS)—provide the building blocks for low-touch, high-velocity IP, Segment
Routing, Ethernet, MPLS, and 10G PON in access to metro networks.
Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. 5
We are an industry-leading, global networking systems, services, and
software company
$3.5B 8.0% $1.3B #1 or #21
Annual Revenue 3YR CAGR Cash Position Market Position
80+ 7,000+ 1,700+ Strong2
Countries Employees Customers Governance Practices
Note: As of FYE or for FY 2020.
1 As cited by Omdia, Dell’Oro Group and Cignal AI for different markets. See Market leadership slide.
2 ISS QualityScore of 1 (out of 10) - Bloomberg
Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. 6Our foundational strengths and execution set us apart from the competition
Leading Technology
Diversification Global Scale
and Innovation
We own the key enabling technologies We have a broad-based business that We have a critical mass of engineering,
for our solutions and use an unmatched spans key customer segments, a wide sales and customer support experts
investment capacity to force the pace range of solutions and applications, and our reach extends to every
of invention in our industry and multiple geographies region around the world
Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. 7Strong momentum in performance & growth
Revenue and adjusted operating margin
20
15
Adjusted operating margin percentage
Revenue in millions (USD)
10
5
0
-5
Revenue
Adj. operating margin
Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. 8Delivering consistent financial performance Source: Company filings Industry Average: ACIA, ADTN, ADVA, CSCO, INFN1, JNPR and NOKIA Networks segment a. INFN represents INFN+Coriant from the time the acquisition closed Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 9
Market Context Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. 10
Several mega trends and the innovations that will enable them
IoT & Connected
Cloud Data Center
Objects
Fiber Deep
Mobility & 5G Living a Hybrid Life
(Cable/MSO)
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 11Our vision for a new network end-state
Closing the Loop – to deliver the Adaptive Network
Technical and professional services
that help customers build, operate, Federated inventory, open domain
and optimize their networks control, and multi-layer orchestration
Blue Planet® MDSO
Blue Planet® NFVO
Predictive analytics and machine Network and IT
learning based on both big data and Operations
small data
Blue Planet® ROA
Blue Planet® UAA
Blue Planet® Inventory
Dynamic pool of virtual and physical
network resources; instrumented,
open, scalable, and secure
Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. 12Market leadership
#1 GLOBALLY #1 GLOBALLY #1 GLOBALLY
◦ DATA CENTER INTERCONNECT ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ DATA CENTER INTERCONNECT
◦ DATA CENTER INTERCONNECT FOR ICP/CNPs ◦ CLOUD & COLO ◦ INTERNET CONTENT PROVIDER CUSTOMERS
◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ PURPOSE-BUILT/COMPACT MODULAR DCI
◦ OPTICAL NETWORKING FOR ICP/CNPs
◦ OPTICAL NETWORK HARDWARE VENDOR SCORECARD #1 N. AMERICA
◦ OPTICAL EQUIPMENT VENDOR LEADERSHIP SP SURVEY ◦ TOTAL OPTICAL NETWORKING #1 N. AMERICA
◦ SLTE WDM ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ TOTAL OPTICAL NETWORKING
◦ TOTAL WDM ◦ DATA CENTER INTERCONNECT
◦ LH WDM ◦ OPTICAL PACKET
#1 N. AMERICA ◦ METRO WDM ◦ TOTAL WDM
◦ TOTAL OPTICAL NETWORKING ◦ SLTE WDM ◦ LH WDM
◦ DATA CENTER INTERCONNECT ◦ METRO WDM
◦ PURPOSE-BUILT/COMPACT MODULAR DCI
◦ TOTAL WDM #2 GLOBALLY
◦ LH WDM ◦ TOTAL OPTICAL NETWORKING #2 GLOBALLY
◦ METRO WDM ◦ TOTAL WDM ◦ TOTAL OPTICAL NETWORKING
◦ SLTE WDM ◦ SLTE WDM ◦ OPTICAL PACKET
◦ ACCESS SWITCHING ◦ TOTAL WDM
◦ LH WDM
◦ METRO WDM
#2 GLOBALLY ◦ CABLE MSO CUSTOMERS
◦ TOTAL OPTICAL NETWORKING
◦ TOTAL WDM
◦ LH WDM
◦ ACCESS SWITCHING
Optical Networking Report, 1Q21 Optical Transport Hardware Report, 1Q21 Optical Transport Report, 1Q21
Data Center Interconnect Market Share Report, 1Q21 Transport Customer Markets Report, 4Q20
Optical Network HW Vendor Scorecard, Jun 2020 Transport Applications Report, 4Q20
Optical Equipment Vendor Leadership Global Service Provider Survey, Dec 2019
Service Provider Routers & Switches Report, 1Q21
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 13Recent Financials Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. 14
Q2 FY 2021 key highlights
Prioritizing long term
Achieving balanced growth Driving the pace of innovation
shareholder value
• Non-telco represented 43% of total • GAAP R&D investment was • Total shareholder return three year
revenue approximately 13% of total revenue CAGR of 31%*
• Direct web-scale increased • 648 100G+ total customers, which • Adjusted gross margin improved by
Works., representing 24% of includes 17 new wins on WaveLogic Ai 230bps YoY
total revenue and 16 new wins on WaveLogic 5 • Repurchased approximately 483,500
• EMEA revenue increased 10% YoY, Extreme shares as part of our equity
representing nearly 19% of total • WL5e has now shipped to 95 repurchase program
revenue customers, all of whom are actively
• Blue Planet revenue increased 60% deploying the technology in their
YoY, reaching $24M - a record networks
* 6/1/2018 to 5/31/2021, S&P Capital IQ
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 15Q2 FY 2021 comparisons (year-over-year)
Revenue Adj. Gross Adj. OpEx*
(in millions) Margin* (in millions)
Adj. Operating Margin* Adj. EBITDA* Adj. EPS*
(in millions)
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. 16Q2 FY 2021 comparative operating metrics
Q2 FY 2021 Q2 FY 2020
Cash and Investments $1.4B $988.5M
Cash Flow from Operations $225M $91M
DSO 86 79
Inventory Turns 3.4 5.0
Gross Leverage 1.1x 1.4x
Net Cash (Debt) $696M $(235)M
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 17Revenue by segment
(Amounts in millions)
Q2 FY 2021 Q2 FY 2020
Revenue %** Revenue %**
Networking Platforms
Converged Packet Optical 573.7 68.8 654.3 73.2
Routing and Switching 63.6 7.6 64.2 7.2
Total Networking Platforms 637.3 76.4 718.5 80.4
Platform Software and Services 56.7 6.8 45.0 5.0
Blue Planet Automation Software and
Services 23.9 2.9 15.0 1.7
Global Services
Maintenance Support and Training 70.4 8.4 71.5 8.0
Installation and Deployment 38.0 4.6 34.2 3.8
Consulting and Network Design 7.6 0.9 9.9 1.1
Total Global Services 116.0 13.9 115.6 12.9
Total $833.9 100.0 % $894.1 100.0 %
* A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation.
** Denotes % of total revenue
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 18Continued revenue strength derived from non-telco customers* *represents 43.0% of total revenue in Q2 FY 2021 Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 19
Revenue by geographic region
10%
11%
17% 11%
17%
16% 14%
19%
19%
20%
73%
73%
70%
64% 66%
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 20Business outlook Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 21
Economic considerations in our 2021 outlook
Revenue Assumptions Profitability Assumptions Business Assumptions
• Industry and economic conditions improve • Mix will have a short-term positive effect on • In the face of an asymmetric recovery from
as we move through the year, enabling gross margin, and is extending into the the pandemic, we are a resilient business
strong second half performance second half with diversification and distinct competitive
advantages
• Spend from service providers globally • While we now expect higher gross margin
returns to pre-pandemic levels with a more for the year, as revenue begins to reflect a • Despite COVID-19, we continue to drive
balanced approach on edge and access more typical mix of existing and new profitability and have capacity for continued
business, gross margin begins to moderate innovation investment
• Customers rebalance spend, prioritizing
new architectures and deployments, which • Strategic investments in our people and
enables us to monetize our design wins • Longer-term fundamental demand drivers–
portfolio drive operating expense to pre-
including increasing network traffic,
pandemic levels
demand for bandwidth and adoption of
cloud architectures – remain strong
While COVID-19 is improving in certain geographies, challenges remain in others
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 22Business Outlook1
Q3' 21
Revenue $950M to $980M
Adjusted Gross Margin 46% to 47%
Adjusted Operating Expense $285M to $290M
FY 2021
Revenue Growth 0% to 3%
Adjusted Gross Margin 46% to 47% for 2H
Adjusted Operating Expense $280M to $285M average per quarter for Q2 through Q4
Adjusted Operating Margin 16% to 17%
1 Projections or outlook with respect to future operating results are only as of June 3, 2021, the date presented on the related earnings call. Actual results may differ materially
from these forward-looking statements. Ciena assumes no obligation to update this information, whether as a result of new information, future events or otherwise.
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 23Q2 FY 2021 appendix Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 24
Gross Profit Reconciliation
(Amounts in thousands)
Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020
GAAP gross profit $412,419 $357,891 $404,349 $464,681 $413,326
Share-based compensation-products 498 953 724 960 827
Share-based compensation-services 1,421 1,205 968 1,007 1,036
Emergency Wage Subsidy - Product (4,189) — — — —
Emergency Wage Subsidy - Services (2,620) — — — —
Amortization of intangible assets 2,856 3,732 3,732 3,834 3,835
Total adjustments related to gross profit (2,034) 5,890 5,424 5,801 5,698
Adjusted (non-GAAP) gross profit $410,385 $363,781 $409,773 $470,482 $419,024
Adjusted (non-GAAP) gross profit percentage 49.2 % 48.0 % 49.5 % 48.2 % 46.9 %
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 25Operating Expense Reconciliation
(Amounts in thousands)
Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020
GAAP operating expense $278,790 $282,096 $310,866 $276,645 $285,838
Share-based compensation-research and development 5,844 4,794 4,030 4,286 4,822
Share-based compensation-sales and marketing 6,610 5,816 5,137 5,180 5,264
Share-based compensation-general and administrative 6,743 6,358 5,982 5,940 5,975
Emergency Wage Subsidy-research and development (28,923) — — — —
Emergency Wage Subsidy-sales and marketing (2,551) — — — —
Emergency Wage Subsidy-general and administrative (2,161) — — — —
Amortization of intangible assets 6,019 5,910 5,851 5,840 5,839
Significant asset impairments and restructuring costs 8,209 5,867 7,854 6,515 3,811
Acquisition and integration costs (recoveries) 294 307 3,127 (2,329) 1,414
Total adjustments related to operating expense 84 29,052 31,981 25,432 27,125
Adjusted (non-GAAP) operating expense $278,706 $253,044 $278,885 $251,213 $258,713
Income from Operations Reconciliation
(Amounts in thousands)
Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020
GAAP income from operations $133,629 $75,795 $93,483 $188,036 $127,488
Total adjustments related to gross profit (2,034) 5,890 5,424 5,801 5,698
Total adjustments related to operating expense 84 29,052 31,981 25,432 27,125
Total adjustments related to income from operations (1,950) 34,942 37,405 31,233 32,823
Adjusted (non-GAAP) income from operations $131,679 $110,737 $130,888 $219,269 $160,311
Adjusted (non-GAAP) operating margin percentage 15.8 % 14.6 % 15.8 % 22.4 % 17.9 %
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 26Net Income Reconciliation
(Amounts in thousands)
Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020
GAAP net income $103,117 $55,348 $65,041 $142,267 $91,655
Exclude GAAP provision for income taxes 21,453 11,966 20,798 38,750 25,308
Income before income taxes 124,570 67,314 85,839 181,017 116,963
Total adjustments related to income from operations (1,950) 34,942 37,405 31,233 32,823
Unrealized (gain) loss on equity investment 165 — (2,681) — —
Adjusted income before income taxes 122,785 102,256 120,563 212,250 149,786
Non-GAAP tax provision on adjusted income before income taxes 25,171 20,962 26,042 45,846 32,354
Adjusted (non-GAAP) net income $97,614 $81,294 $94,521 $166,404 $117,432
Weighted average basic common shares outstanding 155,331 155,174 154,706 154,184 153,858
Weighted average diluted potential common shares outstanding(1)
156,876 156,583 156,563 156,318 155,141
Net Income per Common Share
Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020
GAAP diluted net income per potential common share $ 0.66 $ 0.35 $ 0.42 $ 0.91 $ 0.59
Adjusted (non-GAAP) diluted net income per potential common share $ 0.62 $ 0.52 $ 0.60 $ 1.06 $ 0.76
1. Weighted average diluted potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share
for the second quarter of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 27Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
(Amounts in thousands)
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020
Net income (GAAP) $103,117 $55,348 $65,041 $142,267 $91,655
Add: Interest expense 7,785 7,360 7,395 7,251 7,860
Add: Interest and other (income) loss, net 1,274 1,121 249 (232) 2,665
Add: Provision for income taxes 21,453 11,966 20,798 38,750 25,308
Add: Depreciation of equipment, building, furniture and fixtures, and amortization
24,107 23,188 23,538 21,989 22,599
of leasehold improvements
Add: Amortization of intangible assets 8,875 9,642 9,584 9,674 9,674
EBITDA $166,611 $108,625 $126,605 $219,699 $159,761
Less: Canadian Emergency Wage Subsidy 40,444 — — — —
Add: Share-based compensation cost 21,535 18,964 16,920 17,259 17,977
Add: Significant asset impairments and restructuring costs 8,209 5,867 7,854 6,515 3,811
Add: Acquisition and integration costs (recoveries) 294 307 3,127 (2,329) 1,414
Adjusted EBITDA $156,205 $133,763 $154,506 $241,144 $182,963
Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary. 28Thank You Copyright © Ciena Corporation 2021. All rights reserved. Confidential & Proprietary.
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